“We will increase taxes on vice,” announced Finance Minister Zbyněk Stanjura (ODS) on Thursday when presenting the consolidation package. This effectively means that, in addition to increasing taxes on cigarettes and alcohol, the government also wants to collect more from winnings in lotteries or currency bets. He also wants to send operators of selected gambling to a higher tax rate.
“In accordance with the principles of public health protection and the fight against addictions, the government proposes a second rate of 23% currently applied to live games (e.g. dice, cards, roulette), bingo, odds bets (outcome bets, live bets), totalizer games (horse racing ), raffles and small-scale tournaments (poker) to increase to 30%,” reads the government material.
Tipsport: Risk of illegal bets
According to Tipsport spokesperson Václav Sochor, the taxation of odds bets in the Czech Republic is already one of the highest in Europe. “Its further, very drastic increase may lead to the redevelopment of the illegal market, as legal operators will not be able to offer sufficiently attractive rates compared to illegal Internet competition abroad,” he responded to the government’s proposal.
CLEARLY: Which tax exemptions will be canceled or reduced
According to him, the state will collect less in taxes. “The assumption that higher taxation of odds bets will discourage the public from betting is completely misguided. Unlike other vice taxes (alcohol, tobacco), in the case of odds bets, the tax increase cannot be reflected in the price of the product – the bettor will always bet for the same amounts he is used to. He will just more often consider whether to bet with an illegal operator with more attractive odds,” Sochor claims.
Reduction of the limit for withholding tax
However, higher taxation will not only affect betting companies, but also the bettors themselves.
Now, the way lottery winnings are taxed is that if a person wins less than a million, the winnings are tax free. Above a million, the prize is reduced by fifteen percent withholding tax before it is paid out to the winner.
“Tax on winnings is a withholding tax, i.e. 15 percent of the winnings (over CZK 1 million) will be paid directly to the state by Sazka, 85% of the value of the winnings will then be transferred to the winner’s account,” spokeswoman for the Sazka lottery company Pavla Hoblíková explained the process to Novinka.
Newly, however, all winnings exceeding 50,000 crowns should be subject to these deductions. According to the spokesman of the Ministry of Finance, Tomáš Weiss, it is assumed that lowering the limit to this amount could bring a revenue of approximately 900 million crowns to the state budget.
However, Hoblíková did not want to comment on the planned changes for the company. “We have noted the new proposal, but we will not comment on it,” she added.
Odds bettors in the tax return
As for odds bets, which are especially popular with sports enthusiasts, here, according to Weiss, the process will be more complicated and the winnings will not be reduced by a straight withholding tax, as is the case with lotteries.
The “tippers” will have to include their deposits and any winnings in their tax return, when they will subsequently be taxed on profits exceeding 50,000 crowns.
“The bettor keeps a simple record of his winnings. If his income is one million more than his expenses, he submits a tax return the following year in April. Now it is proposed that the limit for all gambling games be reduced to 50,000 crowns,” Weiss, a spokesman for the Department of Finance, explained to Novinka.
According to Sochor from Tipsport, the proposal to reduce the tax limit is completely unexpected even for odds bettors. According to him, the effect will be the same as the increase in the tax rate for betting companies – it will lead to the development of illegal betting.
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